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Event on 10/29/04 in San Francisco
CEO, Mark Dwight and factory workers of Timbuk2. The company has been making popular bike messenger bags since 1989 out of a factory in San Francisco's Mission district. Chris Stewart / The Chronicle MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/ -MAGS OUT Business#Business#Chronicle#11/9/2004#ALL#5star##0422439873 less

timbuk203116_cs.jpg
Event on 10/29/04 in San Francisco
CEO, Mark Dwight and factory workers of Timbuk2. The company has been making popular bike messenger bags since 1989 out of a factory in San Francisco's ... more

Photo: Chris Stewart

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timbuk203026_cs.jpg
Event on 10/29/04 in San Francisco
CEO, Mark Dwight and factory workers of Timbuk2. The company has been making popular bike messenger bags since 1989 out of a factory in San Francisco's Mission district. Chris Stewart / The Chronicle MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/ -MAGS OUT Business#Business#Chronicle#11/9/2004##5star##0422439871 less

timbuk203026_cs.jpg
Event on 10/29/04 in San Francisco
CEO, Mark Dwight and factory workers of Timbuk2. The company has been making popular bike messenger bags since 1989 out of a factory in San Francisco's ... more

When Mark Dwight took over as chief executive officer of Timbuk2, he knew right away that big changes had to be made.

For years, Timbuk2 had been stitching its popular bike messenger bags at its Mission District factory at a time when few other businesses could resist sending their manufacturing jobs to cheaper lands abroad.

Rob Honeycutt, a former bike messenger who founded Timbuk2 in 1989, began sewing the original bags in his Duboce Triangle apartment in San Francisco. Back then, Honeycutt believed that "Made in the U.S.A." meant something, and he still does. "It has some real cachet," he said in a recent interview.

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But in time, Timbuk2 could no longer fight economic reality. When Dwight, who spent much of his career in the technology sector, came on board in 2002, one of the first things he did was to start manufacturing a new line of products -- in China.

Dwight's decision illustrates the larger struggles that businesses face when they must choose between keeping their roots and remaining competitive. For instance, Levi Strauss & Co., a San Francisco institution, closed its last two sewing plants in the United States in January and shifted that production to China and elsewhere.

Timbuk2's move sparked a minor outcry from its loyalists. Dwight responded with an explanation on the company's Web site: "Yes, it's true. Timbuk2 is making some of its new products in China. We realize this may concern some of our long-standing customers."

The Web site describes the company's fight against "economic pressures to close our factory and move everything to low-cost manufacturing centers outside of the United States" and says that Timbuk2 sees no other options but to manufacture its laptop bags in China.

"Unfortunately, it is not practical for us to make these new products in our San Francisco factory," the Web site says. "The labor cost alone would make the retail price absurdly high."

The elaborate explanation wraps up by saying, "If 'Made in China' offends your sensibilities, we're sorry, and we encourage you to purchase one of our messenger bags made in San Francisco."

Offshoring is a new concept for Timbuk2, which until recently had kept its manufacturing local.

The Mission District factory on Treat Street is painted a bland sort of beige and covered with what looks like graffiti. Upon closer inspection, the graffiti turns out to be the company's official sign above its main entrance, reinforcing Timbuk2's street credibility. A spray-painted blue boy with a devilish grin and a Timbuk2 messenger bag draped across his shoulder assures visitors that they have come to the right place.

The factory employs 45 people, half of whom work on the 13 production lines. The rest work in sales, marketing and finance.

Bolts of bright fabric are stacked on top of each other on the factory floor. Dwight points out that it takes 12 to 15 minutes to turn them into classic Timbuk2 messenger bags. A red tag is attached to every bag to signify that it is custom made. Designated sewing machines mark each bag with the company's signature swirl logo.

Workers at Timbuk2's factory keep their heads down and their mouths closed for the most part. They are all Asian women, their hands always in motion as they slip material through machines and watch the thread form tight dashes along the fabric. The only noise comes from the sewing machines themselves, which drill, then click, then drill again.

Although Dwight said the company still holds true to its original customer, the bike messenger, it has broadened its scope to a far wider audience. Bike messengers make up only a small percentage of Timbuk2 sales. But they are a necessary ingredient in the popularization of the bags.

"I believe the messenger bag has legitimized the man purse," Dwight said. "This was a signature blue-collar product that was adapted as a fashion product."

These days, Dwight has honed his rationale for shipping jobs to China. Cheap labor costs dominate the list, but also important is China's fast- developing infrastructure, particularly in Shenzhen in southern China, where Dwight has access to a rich supply of materials and the latest techniques in manufacturing because of the number of companies and factories there.

"It's not all about labor going to China," Dwight said. "The ecosystem in China is complete. That infrastructure has atrophied in the U.S." But whenever he is asked -- as he inevitably always is -- whether he plans to maintain Timbuk2's factory in San Francisco, Dwight answers the same way. "What I am committed to is keeping this factory open," he said, "as long as it's economically feasible."

Ashok Bardhan, senior research associate for the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said that Timbuk2 faces the very issues that the manufacturing sector has been dealing with for decades. The main pressure to go offshore, he said, is the high cost of doing business in the United States.

"This is not a phenomenon that is reversible," Bardhan said. "So there is little anyone can do about it."

Dwight is careful to point out that he has not technically moved his operations to China. He has simply expanded them to include China. He also notes that Timbuk2 has expanded operations in San Francisco, adding an extra production line to the factory and nudging up the number of employees by 10 percent in the last two years.

Although protective of his San Francisco factory, Dwight is not exactly an apologist for offshoring.

"People don't really understand the (offshoring) issue," he said. "It really has to do with white-collar jobs. When people started to see the 'smart' jobs moving abroad, then they realized that nothing is unassailable."

But, Dwight said, offshoring is nothing new to his industry of blue- collar jobs. "My industry is very mature in offshoring and outsourcing," he said. All his competitors sent jobs abroad many years ago, he added.

The pressure for Timbuk2 to go offshore came at a crucial juncture of the company's development. Jordan Reiss, who began working for Timbuk2 in 1999, created its Build Your Own Bag Web site, which allows customers to go online, pick out colors and fabrics, and e-mail their orders. In 2000, Reiss said, the company was divided about which direction to take the business in next. Although Timbuk2 had always sold its products in bike shops and specialty stores, it was seeing an increase in Internet customers.

The new online business model, although successful, started to pull company apart, Reiss said. "Certain factions didn't want to abandon traditional channels of selling to retail stores while others wanted to expand on the Internet, with the possibility of becoming purely consumer direct," he said. "Unfortunately, that disagreement in upper management was not resolved."

The online model would have most likely kept Timbuk2 in domestic manufacturing because its custom-design nature would not be suited for mass production abroad. But when Dwight arrived in 2002, he made it clear that Timbuk2 would not become an online-only company.

"Retail is vital to us," Dwight said. "We can't build our brand just on the Internet."

Today, Timbuk2's products can be purchased at 1,500 different retail stores, including REI, Eastern Mountain Sports and Apple Computer stores. About one-quarter of Timbuk2's sales are overseas, one-quarter from the Internet and one-half in retail stores.

Since Dwight took over, the company has more than doubled its business, he said. Under the company's founder, Rob Honeycutt, Timbuk2 had been doing about $4 million in annual sales.

"The company went through a little downturn when I arrived," Dwight said. "They were in survival mode for 13 years."

Dwight credits Honeycutt for creating a cult following for Timbuk2, but he said the time had come for the company to change course. Honeycutt and Reiss left Timbuk2 shortly after Dwight became CEO. Both men still hold a stake in the company.

Reiss, who said he is happy with the job Dwight is doing, decided to leave Timbuk2 when offshoring became a part of the company's business model. "It started to lose some of its newsworthiness in my mind," Reiss said of the company. "It was just going to be another offshore bag supplier."

For his part, Dwight would like to discourage Timbuk2's customers from getting too attached to the company's home base. "I've tried to decouple the brand name from 'Made in the U.S.A.,' " he said. "I want the brand promise of 'Made in the U.S.A.' to be reinforced, but I don't want the product to be dependent on it."

As a savvy entrepreneur, however, Dwight knows how to play the San Francisco homegrown appeal to his advantage.

"I'm proud that we defy conventional wisdom," he said. "It is also not lost on me that there's a promotional aspect of being here."

Timbuk2

What it does: Makes bike messenger bags, as well as laptop bags, handbags and other accessories